Don't Tinker with Spending, Overhaul It

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Published August 24, 2012

| FOXBusiness

If you canceled all government salaries, the entire U.S. Armed Forces and all expenses associated with them, along with anything the government funds as part of its current operations -- we still would not have a balanced budget.

Yes, we could shut down the entire government and still be running a deficit.

According to the numbers from the Office of Management and Budget, for the fiscal year 2012 the U.S. received $2.469 trillion in receipts (total money coming into the government) and is spending $3.796, a deficit of $1.327 trillion.

However, if you break it down further you will see that our “mandatory” expenses (things we have an obligation to pay such as Social Security, Medicare, Medicaid and welfare programs) total $2.252 trillion. If you add in interest expenses (which we have also promised to pay) you add another $225 billion, which totals $2.477 trillion, $8 billion more than came in to the government ($2.469 trillion).

We have a hole of $8 billion before one penny is spent on the current government needs.

See the problem?

Here is where it gets partisan -- but this is not a partisan matter. There is a rallying cry to raise taxes on the “rich”, which would bring in about $40 billion to $50 billion – a drop in the bucket.

In fact, if you doubled tax rates -- raised them 100% -- we still don’t get there. Individual income taxes are $1.165 trillion, if we doubled that to $2.33 trillion it still doesn’t cover the annual deficit (we would be around $200 billion short). And that is raising tax rates on everyone by 100%!

By 2022 we will have increased the overall debt to $23 trillion (this budget spends $46.959 trillion and expects to receive $40.274 trillion over the next 10 years). And our debt service is expected to be $850 billion with our ‘mandatory’ expense being $3.67 trillion with a total outlay of $5.8 trillion.

The receipts in 2022 are expected to be $2.6 trillion for income tax, an almost 125% increase over today, which means tax rates will go up 125% and corporate tax rates will go up over 100% also, yet we will still be running a deficit of $704 billion.

With wage growth anemic, do we really believe we will grow taxes from individuals by 125% in ten years? Do you believe that you will be able to afford paying 125% more in taxes than you pay now in just ten years?

These are fantasy numbers for tax rates and presumed growth. However, the bigger point is that we can shut down government and still lose money. We can double tax rates on everyone and still lose money.

We must have an overhaul of everything. These marginal adjustments to tax rates, defense and entitlement programs are the only thing politicians who want to get re-elected will do. We must overhaul the tax code, Social Security and other entitlements and look at defense and see what we need to cut.

The Democrats and Republicans have done this country a massive disservice, and they are both still wrong. This is too short of an article to go into how to fix the entitlements and revenue shortfalls, or how we got into such a mess.

Suffice it to say, cutting spending alone doesn’t get us there and raising taxes alone doesn’t do it. We must find a way to overhaul these programs from the IRS tax code to the entitlement programs to both cut spending and get more, and fair, revenue.

I would also ask that we discuss things such as this, instead of the gaffes both sides are making, which only takes away from the real debate this country needs.

John Layfield, formerly known as JBL, was the longest reigning WWE Champion in Smackdown television history, retiring after 17 years of pro wrestling. John, a former collegiate All-American and pro football player, is a lifelong entrepreneur who has worked as an investment banker, is series 7 and 24 qualified, and is currently an active private investor.

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http://www.foxbusiness.com/economy/2012/08/24/dont-tinker-with-spending-overhaul-it/